The founding of the American Agrarian Empire and the Conflict of Land and Capital

Norman Schofield ()

Homo Oeconomicus, 2003, vol. 19, pages 471-505

Abstract: Two quite different, but equally plausible, theories of the “cause” of the foundation of the United States in 1787 have been put forward, first by Charles Beard (1913), and then by William Riker (1964). Beard’s thesis was that the preferences underlying the Ratification were generated by economic interests associated with capital - the differing interests of “merchants, money lenders and financiers” against “farmers and debtors”. Riker, in contrast, focused on the clear threat posed by Spain on the Mississippi. The confederation was too weak, politically and militarily, to face this threat. Voting by the States, over Jay’s attempt to negotiate with Gardoquin, suggested to Madison that the weak Confederation would fragment as states followed their differing geopolitical interests. To bind them together required a federal apparatus. This apparatus could both deal with the military threat, and, by enforcing a hard money principle, exercise the fiscal discipline required for economic growth. While both Beard and Riker were thus correct, there was one aspect of Union that they did not discuss. Prior to 1787, democracy was feared because of its potential for factionalism. Madison’s arguments in Federalist 10 and Federalist 51 may have allayed the fear of factionalism and helped create a winning Federalist coalition. In the 1790’s, it became obvious that Hamilton’s scheme to construct a powerful fiscal machine based on a “Walpole equilibrium”, would benefit capital over land. This led both Jefferson and Madison to create a “loyal opposition party” in the manner of Bolingbroke. The economic logic underlying the Republican party was, thus, a conflict, again, but this time between the interests of land and capital. This Republican coalition, and later, the Democracy, depended on the coincidence of interests between the agrarian concerns of both free labor and slavery. From 1800 to 1860 this coalition dominated U.S. politics.

Date: 2003
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